Decisions
TRI-WEST INVESTMENT CLUB, et. al. [Decision]
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BCSECCOM #:
2001 BCSECCOM 1091
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Document Type:
Decision
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Published Date:
2001-11-20
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Effective Date:
2001-11-19
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Details:
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2001 BCSECCOM 1091
COR#01/122
IN THE MATTER OF THE SECURITIES ACT
R.S.B.C. 1996, c. 418
AND
IN THE MATTER OF TRI-WEST INVESTMENT CLUB, TRIWESTINVEST.COM, AND HAARLEM UNIVERSAL CORPORATION
AND
IN THE MATTER OF JASON KINGSLEY, MARK GOLDMAN, ALAN RICHARDS, ALEX HAARLEM, AND JOHN BYRON
PANEL
Adrienne Salvail-Lopez
Joan L. Brockman
John K. Graf
DATE OF HEARING
November 9, 2001
DATE OF DECISION
November 19, 2001
APPEARING FOR COMMISSION STAFF
Patricia A.A. Taylor
DECISION OF THE COMMISSION
[para 1]
We released our findings on October 23, 2001; see 2001 BCSECCOM 1013. On November 9, we reconvened to hear submissions respecting orders we should make against the respondents under sections 161, 162 and 174 of the Securities Act, R.S.B.C. 1996, c. 418. None of the respondents attended the hearing.
[para 2]
Tri-West Investment Club operates an internet based investment program purporting to offer high yield, no risk securities. Tri-West’s “Bank Debenture Trading Program” guarantees a rate of return of 10% per month and offers financial incentives to its members to bring in new members. At least 17 investors in British Columbia invested US$100,000 in Tri-West. These investors stopped receiving their monthly interest payments from Tri-West in May 2001 and it appears that they have lost all of the money they invested.
[para 3]
The Tri-West website, triwestinvest.com, indicates that Tri-West’s day to day operations are conducted by Jason Kingsley, Mark Goldman and Alan Richards. The website also indicates that Tri-West trades exclusively through Haarlem Universal Corporation, of which Alex Haarlem is founder, chair and consultant. The money orders sent by investors were made payable to Haarlem Universal and the cheques received by them were issued by Haarlem Universal.
[para 4]
We determined that the Tri-West program is a quintessential example of a prime bank instrument fraud. These frauds claim to involve the purchase and sale of fully negotiable bank instruments of the top, or prime, world banks. In fact, neither the instruments, nor the markets on which they allegedly trade, exist.
[para 5]
Tri-West and Haarlem Universal were the vehicles for the fraud. The individuals behind Tri-West and Haarlem Universal – Kingsley, Goldman, Richards and Haarlem (or others using those names) – devised the program, set up and maintained the Tri-West website and processed payments from and to investors.
[para 6]
Consequently, we found that Tri-West, Haarlem Universal and the individuals holding themselves out as Kingsley, Goldman, Richards and Haarlem perpetrated a fraud on persons in British Columbia, contrary to section 57 of the Act. We also found that they traded in the securities of Tri-West without being registered, contrary to section 34(1)(a) of the Act, and that Tri-West distributed its securities without obtaining a receipt for a prospectus, contrary to section 61(1) of the Act.
[para 7]
The internet has greatly facilitated the proliferation of prime bank instrument frauds throughout the world. In this case, Tri-West, Haarlem Universal and the individuals behind them used the anonymity and the reach afforded by the internet to peddle their fraudulent investment scheme to anyone with access to their website, including investors in British Columbia. In doing so, they perpetrated a fraud on a massive scale.
[para 8]
Their conduct is so abusive that their continued presence in the capital markets would seriously impair investor confidence in those markets and, as a consequence, market integrity. Therefore, we consider it to be in the public interest to remove them from the capital markets permanently. Accordingly, we order:
1. under section 161(1)(b) of the Act that all persons cease trading in and are prohibited from purchasing the securities of Tri-West and Haarlem Universal;
2. under section 161(1)(c) of the Act that the exemptions described in sections 44 to 47, 74, 75, 98 and 99 of the Act do not apply to Tri-West, Haarlem Universal and the individuals holding themselves out as Kingsley, Goldman, Richards and Haarlem;
3. under section 161(1)(d)(i) of the Act that the individuals holding themselves out as Kingsley, Goldman, Richards and Haarlem resign any position any of them holds as a director or officer of any issuer;
4. under section 161(1)(d)(ii) of the Act that the individuals holdings themselves out as Kingsley, Goldman, Richards and Haarlem are prohibited from becoming or acting as a director of officer of any issuer;
5. under section 161(1)(d)(iii) of the Act that Tri-West, Haarlem Universal and the individuals holding themselves out as Kingsley, Goldman, Richards and Haarlem are prohibited from engaging in investor relations activities; and
6. under section 162 of the Act that Tri-West, Haarlem Universal and the individuals holding themselves out as Kingsley, Goldman, Richards and Haarlem each pay an administrative penalty of $100,000.
[para 9]
While John Byron did not participate in the development of the Tri-West program, he actively promoted the program, even though he should have recognized it was an outright scam. He sent at least one facsimile to a resident of British Columbia soliciting investment in Tri-West. He held himself out as being expert at evaluating money making enterprises and characterized the Tri-West securities as providing excellent results. He went so far as to put together his own variation of the program, which he claimed would provide an enhanced return to investors. Byron did all of these things knowing that he would financially benefit from every new member he brought to Tri-West. We recognize, however, that there is no evidence that anyone invested in Tri-West as a consequence of Byron’s efforts or that he received any payments for those efforts.
[para 10]
We found that Byron perpetrated a fraud on persons in British Columbia, contrary to section 57 of the Act. We also found that he traded in securities of Tri-West, and acted as an adviser, without being registrated, contrary to section 34(1)(a) and (c) of the Act.
[para 11]
We consider it to be in the public interest to prevent Byron from dealing with investors for a significant period. Accordingly, we order:
1. under section 161(1)(c) of the Act that the exemptions described in sections 44 to 47, 74, 75, 98 and 99 of the Act do not apply to Byron for a period of eight years, except that Byron may trade solely through a registered dealer and only for his own account under section 45(2)(7) of the Act;
2. under section 161(1)(d)(i) of the Act that Byron resign any position he holds as a director or officer of any issuer;
3. under section 161(1)(d)(ii) of the Act that Byron is prohibited from becoming or acting as a director or officer of any issuer until the later of
(a) eight years from the date of this order, and
(b) the date he successfully completes a course of study satisfactory to the Executive Director concerning the duties and responsibilities of directors and officers;
4. under section 161(1)(d)(iii) of the Act that Byron is prohibited from engaging in investor relations activities for a period of eight years; and
5. under section 162 of the Act that Byron pay an administrative penalty of $10,000.
[para 12]
Commission staff is also seeking costs in the amount of $33,803. These costs represent $17,265 for time spent by investigation staff, $6,720 for time spent by litigation staff, $6,000 for administrative costs and $3,818 for disbursements.
[para 13]
Accordingly, we order under section 174 of the Act that Byron, Tri-West, Haarlem Universal and the individuals holding themselves out as Kingsley, Goldman, Richards and Haarlem pay on a joint and several basis costs of or related to the hearing in the amount of $33,803, provided that Byron’s portion does not exceed $8,000.
[para 14]
November 19, 2001.
FOR THE COMMISSION
Adrienne Salvail-Lopez, Commissioner
Joan L. Brockman, Commissioner
John K. Graf, Commissioner